Thoughts on the Market

• The Economic Stakes of President Trump’s Immigration Policy

  Our economists Michael Gapen and Sam Coffin discuss how a drop in immigration is tightening labor markets, and what that means for the U.S. economic outlook and Fed policy. Read more insights from Morgan Stanley.----- Transcript -----Michael Gapen: Welcome to Thoughts on the Market. I'm Michael Gapen, Morgan Stanley's Chief U.S. Economist.Sam Coffin: And I'm Sam Coffin, Senior Economist on our U.S. Economics research team.Michael Gapen: Today we're going to have a discussion about the potential economic consequences of the administration’s shift in immigration policies. In particular, we’ll focus much of our attention on the influence that immigration reform is having on the U.S. labor market. And what it means for our outlook on Federal Reserve policy.It's Friday, June 13th at 9am in New York.So, Sam, news headlines have been dominated by developments in the President's immigration policies; what is being called by, at least some commentators, as a toughening in his stance.But I'd like to set the stage first with any new information that you think we've received on border encounters and interior removals. The administration has released new data on that recently that covered at least some of the activity earlier this year. What did it tell you? And did it differ markedly from your expectations?Sam Coffin: What we saw at first was border encounters falling sharply to 30,000 a month from 200,000 or 300,000 a month last year. It was perhaps a surprise that they fell that sharply. And on the flip side, interior removals turned out to be much more difficult than the administration had suggested. They'd been targeting maybe 500,000 per year in removals, 1500 a day. And we're hitting a third or a half of that pace.Michael Gapen: So maybe the recent escalation in ICE raids could be in response to this, right? The fact that interior removals have not been as large as some in the administration would desire.Sam Coffin: That's correct. And we think those efforts will continue. The House Budget Reconciliation Bill, for example, has about $155 billion more in the budget for ICE, a large increase over its current budget. This will likely mean greater efforts at interior removals. About half of it goes to stricter border enforcement. The other half goes to new agents and more operations. We'll see what the final bill looks like, but it would be about a five-fold increase in funding.Michael Gapen: Okay. So much fewer encounters, meaning fewer migrants entering the U.S., and stepped-up enforcement on interior removals. So, I guess, shifting gears on the back of that data. Two important visa programs have also been in the news. One is the so-called CHNV Parole Program that's allowed Cubans, Haitians, Nicaraguans, and Venezuelans to enter the U.S. on parole. The Supreme Court recently ruled that the administration could proceed with removing their immigration status.We also have immigrants on TPS, or Temporary Protected Status, which is subject to periodic removal; if the administration determines that the circumstances that warranted their immigration into the U.S. are no longer present. So, these would be immigrants coming to the U.S. in response to war, conflict, environmental disasters, hurricanes, so forth.So, Sam, how do you think about the ramping up of immigration controls in these areas? Is the end of these temporary programs important? How many immigrants are on them? And what would the cancellation of these mean in terms of your outlook for immigration?Sam Coffin: Yeah, for CHNV Paroles, there are about 500,000 people paroled into the U.S. The Supreme Court ruled that the administration can cancel those paroles. We expect now that those 500,000 are probably removed from the country over the next six months or so. And the temporary protected status; similarly, there are about 800,000 people on temporary protected status. About 600,000 of them have their temporary status revoked at this point or at least revoked sometime soon. And it looks like we'll get a couple hundred thousand in deportations out from that program this year and the rest next year.The result is net immigration probably falling to 300,000 people this year. We'd expected about a million, when we came into this year, but the faster pace of deportation takes that down. So, 300,000 this year and 300,000 next year, between the reduction in border encounters and the increase in deportations.Michael Gapen: So that's a big shift from what we thought coming into the year. What does that mean for population growth and growth in the labor force? And how would this compare – just put it in context from where we were coming out of the pandemic when immigration inflows were quite large.Sam Coffin: Yeah. Population growth before the pandemic was running 0.5 to 0.75 percent per year. With the large increase in immigration, it accelerated 1-1.25 percent during the years of the fastest immigration. At this point, it falls by about a point to 0.3-0.4 percent population growth over the next couple of years.Michael Gapen: So almost flat growth in the labor force, right? So, translate that into what economists would call a break-even employment rate. How much employment do you need to push the unemployment rate down or push the unemployment rate up?Sam Coffin: Yeah, so last year – I mean, we have the experience of last year. And last year about 200,000 a month in payroll growth was consistent with a flat unemployment rate. So far this year, that's full on to 160,000-170,000 a month, consistent with a flat unemployment rate. With further reduction in labor force growth, it would probably decline to about 70,000 a month. So much slower payrolls to hold the unemployment rate flat.Michael Gapen: So, as you know, we've taken the view, Sam, that immigration controls and restrictions will mean a few important things for the economy, right? One is fewer consuming households and softening demand, but the foreign-born worker has a much higher participation rate than domestic workers; about 4 to 5 percentage points higher.So, a lot less labor force growth, as you mentioned. How have these developments changed your view on exactly how hard it's going to be to push the unemployment rate higher?Sam Coffin: So, so far this year, payrolls have averaged about 140,000 a month, and the unemployment rate's been going sideways at 4.2 percent. It's been going sideways since – for about nine months now, in fact. We do expect that payroll growth slows over the course of this year, along with the slowing in domestic demand. We have payroll growth falling around 50,000 a month by late in the year; but the unemployment rate going sideways, 4.3 percent this year because of that decline in breakeven payrolls.For next year, we also have weak payroll growth. We also expect weak payroll growth of about 50,000 a month. But the unemployment rate rising somewhat more to 4.8 percent by the end of the year.Michael Gapen: So, immigration controls really mean the unemployment rate will rise, but less than you might expect and later than you might expect, right? So that's I guess what we would classify as the cyclical effect of immigration.But we also think immigration controls and a much slower growth in the labor force means downward pressure on potential. Where are we right now in terms of potential growth and where's that vis-a-vis where we were? And if these immigration controls go into place, where do we think potential growth is going?Sam Coffin: Well, GDP potential is measured as the sum of productivity growth and growth in trend hours worked. The slower immigration means slower labor force growth and less capacity for hours. We estimated potential growth between 2.5 and 3 percent growth in 2022 to 2024. But we have it falling to 2.0 percent presently – or back to where it was before COVID. If we're right on immigration going forward and we see those faster deportations and the continued stoppage at the border, it could mean potential growth of only 1.5 percent next year.Michael Gapen: That’s a big change, of course, from where the economy was just, you know, 12 to 18 months ago. And I'd like to circle back to one point that you made in bringing up the recent employment numbers. In the May job report that was released last week, we also saw a decline in labor force participation. It went down two-tenths on the month.Now, on one hand that may have prevented a rise in the unemployment rate. It was 4.2 but could have been maybe 4.5 percent or so – had the participation rate held constant. So maybe the labor market weakened, and we just don't know it yet. But you have an idea that you've put forward in some of our reports that there might be another explanation behind the drop in the participation rate. What is that?Sam Coffin: It could be that the threat of increased deportations has created a chilling effect on the participation rate of undocumented workers.Michael Gapen: So, explain to listeners what we mean by a chilling effect in participation, right? We're not talking about restricting inflows or actual deportations. What are we referring to?Sam Coffin: Perhaps undocumented workers step out of the workforce temporarily to avoid detection, similar to how people stayed out of the workforce during the pandemic because of fear of infection or need to take care of children or parents. If this is the case, some of the foreign-born population may be stepping out of the labor force for a longer period of time.Michael Gapen: Right. Which would mean the unemployment rate at 4.2 percent is real and does not mask weakness in the labor market. So, whether it's less in migration, more interior removals, or a chilling effect on participation, then the labor market still stays tight.Sam Coffin: And this is why we think the Fed moves later but ultimately cuts more. It's a combination of tariffs and immigration.Michael Gapen: That's right. So, our baseline is that tariffs push inflation higher first, and so the Fed sees that. But if we're right on immigration and your forecast is that the unemployment rate finishes the year at 4.3, then the Fed just stays on hold. And it's not until the unemployment rate starts rising in 2026 that the Fed turns to cuts, right. So, we have cuts starting in March of next year. And the Fed cutting all the way down to 250 to 275.Well, I think altogether, Sam, this is what we know now. It's certainly a fluid situation. Headlines are changing rapidly, so our thoughts may evolve over time as the policy backdrop evolves. But Sam, thank you for speaking with me.Sam Coffin: Thank you very much.Michael Gapen: And thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

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  10:48
• Midyear Credit Outlook: Slowdown in Europe

  Our analysts Andrew Sheets and Aron Becker explain why European credit markets’ performance for the rest of 2025 could be tied to U.S. growth.Read more insights from Morgan Stanley.----- Transcript -----Andrew Sheets: Welcome to Thoughts on the Market. I'm Andrew Sheets, Head of Corporate Credit Research at Morgan Stanley.Aron Becker: And I'm Aron Becker, Head of European Credit Strategy.Andrew Sheets: And today on the program, we're continuing a series of conversations covering the outlook for credit around the world. Morgan Stanley has recently updated its forecast for the next 12 months, and here we're going to bring you the latest views on what matters for European credit.It's Thursday, June 12th at 2pm in London.So, Aron, it's great to have this conversation with you. Today we're going to be talking about the European credit outlook. We talked with our colleague Vishwas in the other week about the U.S. credit outlook. But let's really dive into Europe and how that looks from the perspective of a credit investor.And maybe the place to start is, from your perspective, how do you see the economic backdrop in Europe, and what do you think that means for credit?Aron Becker: Right. So, on the European side, our growth expectations remain somewhat more challenging. Our economists are expecting growth after a fairly strong start to slow down in the back half of this year. The German fiscal package that was announced earlier this year will take time to lift growth further out in 2026. So, in the near term, we see a softening backdrop for the domestic economy.But I think what's important to emphasize here is that U.S. growth, as Vishwas and you have talked about last time around, is also set to decelerate on our economists forecast more meaningfully. And that matters for Europe.Two reasons why I think the U.S. growth outlook matters for European credit. One, nearly a quarter of European companies’ revenues are generated in the U.S. And two, U.S. companies themselves have been very actively tapping the European corporate bond markets. And in fact, if you look at the outstanding notion of bonds in the euro benchmarks, the largest country by far is U.S. issuers. And so, I do think that we need to think about the outlook on the macro side, more in a global perspective, when we think about the outlook for European credit. And if we look at history, what we can deduct from the simple correlation between growth and credit spreads is current credit valuations imply growth would be around 3 percent. And that's a stark contrast to our economists’ forecast where both Europe and U.S. is decelerating to below 1 percent over the next 12 months.Andrew Sheets: But Aron, you know, you talked about the slow growth, here in Europe. You talked about a slower growth picture in the U.S. You talked about, you know, pretty extensive exposure of European companies into the U.S. story. All of which sound like pretty challenging things. And yet, if one looks at your forecasts for credit spreads, we think they remain relatively tight, especially in investment grade.So, how does one square that? What's driving what might look like, kind of, a more optimistic forecast picture despite those macro challenges?Aron Becker: Right. That's a very important question. I think that it's not all about the growth, and there are a number of factors that I think can alleviate the pressures from the macro side. The first is that unlike in the U.S., in Europe we are expecting inflation to decelerate more meaningfully over the coming year. And we do think that the ECB and the Bank of England will continue to ease policy. That's good for the economy and the eventual rebound. And we also think that it's good for demand for credit products. For yield buyers where the cash alternative is getting less and less compelling, I think they will see yields on corporate credit much more attractive. And I do think that credit yields right now in Europe are actually quite attractive.Andrew Sheets: So, Aron, you know, another question I had is, if you think about some of those dynamics. The fact that interest rates are above where they've been over the last 10 years. You think about a growth environment in Europe, which is; it's not a recession, but growth is, kind of, 1 percent or a little bit below.I mean, some ways this is very similar to the dynamic we had last year. So, what do you think is similar and what do you think is different, in terms of how investors should think about, say, the next 12 months – versus where we've been?Aron Becker: Right. So, what's really similar is, for example, the yield, like I just mentioned. I think the yield is attractive. That hasn't really changed over the past 12 months. If you just think about credit as a carry product, you're still getting around between 3-3.5 percent on an IG corporate bond today.What's really different is that over the same period, the ECB has already lowered front-end rates by 200 basis points. And at the same time, if you think about the fiscal developments in Germany or broader rates dynamics, we've seen a sharp steepening of yield curves; and curves are actually at the steepest levels in two years now. And what this leaves us with is not only high carry from the yield on corporate bonds, but also investors are now rolling down on a much steeper curve if they buy bonds today, especially further out the curve.So, by our estimate, if you aggregate the two figures in terms of your expected total return, credit offers actually total returns much higher than over the past 12 months, and closer to where we were in the LDI crisis in 2022.Andrew Sheets: So, Aron, another development I wanted to ask you about is, if you look at our forecast for the year ahead, our global forecast. One theme is that on the government side there's projected to be a lot more borrowing. There's more borrowing in Germany, and then there's more borrowing in the U.S., especially under certain versions of the current budget proposals being debated. So, you know, it does seem like you have this contrast between more borrowing and kind of a worsening fiscal picture in governments, a better fiscal picture among corporates. We talk about the spread. The spread is the difference between that corporate and government borrowing.So, I guess looking forward first, do you think European companies are going to be borrowing more money? And certainly more money on a relative, incremental basis at these yield levels, which are higher than what they're used to in the past. And, secondly, how do you think about the relative valuation of European credit versus some of the sovereign issuers in Europe, which is often a debate that we'll have with investors?Aron Becker: Big picture? We have seen companies be very active in tapping the corporate bond markets this year. We had a record issuance in May in terms of supply. Now I would push back on the view that that's negative for investors, and expectations for spreads to widen as a result for a number of reasons. One is a lot of gross issuance tends to be good for investors who want to pick up some new issue premiums – as these new bonds do come a little bit cheap to what's out there in terms of available secondary bonds.And second, it creates a lot of liquidity for investors to actually deploy capital, when they do want to enter the bond market to invest. And what we really need to remember here is all this strong issuance activity is coming against very high maturing, volumes of bonds. Redemptions this year are rising by close to 20 percent versus last year. And so, even though we are projecting this year to be a record year for growth issuance from investment grade companies, we think net supply will be lower year-on-year as a result of those elevated, maturities.So overall, I think that's going to be a fairly positive technical backdrop. And as you alluded to it, that's a stark contrast to what the sovereign market is facing at the moment.Andrew Sheets: So, on that net basis, on the amount that they're issuing relative to what they're paying back, that actually is probably looking lower than last year, on your numbers.Aron Becker: Exactly.Andrew Sheets: And finally, Aron, you know, so we've talked a bit about the market dynamics, we've talked about the economic backdrop, we've talked about the issuance backdrop. Where does this leave your thoughts for investors? What do you think looks, kind of, most attractive for those who are looking at the European credit space?Aron Becker: Opportunities are abound, but I think you need to be quite selective of where to actually increase your risk exposure, in my view. One part which we are quite out of consensus on here at Morgan Stanley is our recommendation in European credit to extend duration further out the curve.This goes back to the point I made earlier, that curves are very steep and a lot of that carry and roll down that I think look particularly attractive; you do need to extend duration for that. But there are a number of reasons why I think that that type of trade can work in this backdrop.For one, like I said, valuations are attractive. Two, I also think that from an issuer perspective, it is expensive to tap very long dated bonds now because of that yield dynamic, and I don't necessarily see a lot of supply coming through further out the curve. Three, our rates team do expect curves to bull steepen on the rate side and historically that has tended to favor excess returns further out the curve.And fourth is, a word we love to throw around – convexity. Cash prices further out the curve are very low in investment grade credit. That tends to be actually quite attractive because then even if you get the name wrong, for example, and there are some credit challenges down the line for some of these issuers, your loss given default may be more muted if you entered the bond at a lower cash price.Andrew Sheets: Aron, thanks for taking the time to talk.Aron Becker: Thanks, Andrew. Andrew Sheets: And to our listeners, thank you for sharing a few minutes of your day with us. If you enjoy the show, leave us a review wherever you listen to this podcast and share Thoughts on the Market with a friend or colleague today.

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  9:59
• What the New Tax Bill Means for Cross-Border Portfolios

  Our Global Head of Fixed Income Research and Public Policy Strategy Michael Zezas reads the fine print of U.S. tax legislation to understand how it might affect foreign companies operating in the U.S. and foreign investors holding U.S. debt.Read more insights from Morgan Stanley.----- Transcript -----Welcome to Thoughts on the Market. I’m Michael Zezas, Global Head of Fixed Income Research and Public Policy Strategy. Today we're talking about a proposal tucked away in U.S. tax legislation that could impact investors in meaningful ways: Section 899.It’s Wednesday, June 11th, at 12 pm in New York. So, Section 899 is basically a new rule that's part of a bigger bill that passed the House. It would give the U.S. Treasury the power to hit back with taxes on foreign companies if they think other countries are unfairly taxing U.S. businesses. And this rule could override existing tax agreements between countries, even applying to government funds and pension plans.The immediate concern is whether foreign holdings of U.S. bonds would be taxed – something that’s not entirely clear in the draft language. Making the costs of ownership higher would affect holders of tens of trillions of U.S. securities. That includes about 25 percent of the U.S. corporate bond market. In short, the concern is that this would disincentivize ownership of U.S. bonds by overseas investors, creating extra costs or risk premium – meaning higher yields. The good news is that there's a decent chance the Senate will tweak or clarify Section 899. Consider the evidence that the motive of those who drafted this provision doesn’t seem to have been to tax fixed income securities. If it was, you’d expect the official estimates of how much tax revenue this provision would generate to be far higher than what was scored by Congress. Public comments by Senators seem to mirror this, signaling changes are coming. But while that might mitigate one acute risk associated with 899, other risks could linger. If the provision were enacted, it acts as an extra cost on foreign multinationals investing in building businesses in the U.S. That means weaker demand for U.S. dollars overall. So while this is not at the core of our FX strategy team’s thesis on why the dollar weakens further this year, it does reinforce the view. For European equities, our equity strategy team flags that Section 899 adds a whole new layer of worry on top of the tariff concerns everyone's been talking about. While people have been focused on European goods exports to the U.S., Section 899 could affect a much broader range of European companies doing business in America. The most vulnerable sectors include Business Services, Healthcare, Travel & Leisure, Media, and Software – basically, any European company with significant U.S. business.The bottom line, even if modified, if section 899 stays in the bill and is enacted, there’s key ramifications for the U.S. dollar and European stocks. But pay careful attention in the coming days. The provision could be jettisoned from the Senate bill. It's still possible that it's too big of a law change to comply with the Senate’s budget reconciliation procedure, and so would get thrown out for reasons of process, rather than politics. We’ll be tracking it and keep you in the loop.Thanks for listening. If you enjoy Thoughts on the Market please leave us a review. And tell your friends. We want everyone to listen.

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  3:23
• How China Is Rewriting the AI Code

  Our Head of Asia Technology Research Shawn Kim discusses China's distinctly different approach to AI development and its investment implications.Read more insights from Morgan Stanley.----- Transcript -----Welcome to Thoughts on the Market. I’m Shawn Kim, Head of Morgan Stanley’s Asia Technology Team. Today: a behind-the-scenes look at how China is reshaping the global AI landscape. It’s Tuesday, June 10 at 2pm in Hong Kong. China has been quietly and methodically executing on its top-down strategy to establish its domestic AI capabilities ever since 2017. And while U.S. semiconductor restrictions have presented a near-term challenge, they have also forced China to achieve significant advancements in AI with less hardware. So rather than building the most powerful AI capabilities, China’s primary focus has been on bringing AI to market with maximum efficiency. And you can see this with the recent launch of DeepSeek R1, and there are literally hundreds of AI start-ups using open-source Large Language Models to carve out niches and moats in this AI landscape. The key question is: What is the path forward? Can China sustain this momentum and translate its research prowess into global AI leadership? The answer hinges on four things: its energy, its data, talent, and computing. China’s centralized government – with more than a billion mobile internet users – possess enormous amounts of data. China also has access to abundant energy: it built 10 nuclear power plants just last year, and there are ten more coming this year. U.S. chips are far better for the moment, but China is also advancing quickly; and getting a lot done without the best chips. Finally, China has plenty of talent – according to the World Economic Forum, 47 percent of the world’s top AI researchers are now in China. Plus, there is already a comprehensive AI governance framework in place, with more than 250 regulatory standards ensuring that AI development remains secure, ethical, and strategically controlled. So, all in all, China is well on its way to realizing its ambitious goal of becoming a world leader in AI by 2030. And by that point, AI will be deeply embedded across all sectors of China’s economy, supported by a regulatory environment. We believe the AI revolution will boost China’s long-term potential GDP growth by addressing key structural headwinds to the economy, such as aging demographics and slowing productivity growth. We estimate that GenAI can create almost 7 trillion RMB in labor and productivity value. This equals almost 5 percent of China’s GDP growth last year. And the investment implications of China’s approach to AI cannot be overstated. It’s clear that China has already established a solid AI foundation. And now meaningful opportunities are emerging not just for the big players, but also for smaller, mass-market businesses as well. And with value shifting from AI hardware to the AI application layer, we see China continuing its success in bringing out AI applications to market and transforming industries in very practical terms. As history shows, whoever adopts and diffuses a new technology the fastest wins – and is difficult to displace. Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.

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  3:38
• U.S. Financials Conference: Three Key Themes to Watch

  Our analysts Betsy Graseck, Manan Gosalia and Ryan Kenny discuss the major discussions they expect to highlight Morgan Stanley’s upcoming U.S. Financials conference.Read more insights from Morgan Stanley.----- Transcript -----Betsy Graseck: Welcome to Thoughts on the Market. I'm Betsy Graseck, Morgan Stanley's U.S. Large Cap Bank Analyst and Morgan Stanley's Global Head of Banks and Diversified Finance Research. Today we take a look at the key debates in the U.S. financials industry. It’s Monday, June 9th at 10:30am in New York.Tomorrow Morgan Stanley kicks off its annual U.S. Financials Conference right here in New York City. We wanted to give you a glimpse into some of the most significant themes that we expect will be addressed at the conference. And so, I'm here with two of my colleagues, Manan Gosalia, U.S. Midcap Banks Analyst, and Ryan Kenny, U.S. Midcaps Advisor Analyst.Investors are grappling with navigating economic uncertainty from new tariff policies, inflation concerns, and immigration challenges – all of which impacts financial growth and credit quality. On the positive side, they are also looking closely at regulatory shifts under the Trump administration, which could ease banking rules for the first time since the Great Financial Crisis.Let's hear what our experts are expecting. Manan, ahead of the conference, what key themes do you expect mid-cap banks will highlight?Manan Gosalia: So, there are three key themes that we've been focused on for the mid-cap banks: loan growth, net interest margins, and capital. So, first on loan growth. Loan growth for the regional banks has been fairly tepid at about 2 to 3 percent year-on-year, and the tone from bank management teams has been fairly mixed in the April earning season that followed the tariff announcements on April 2nd. Some banks were starting to see the uncertainty weigh on corporate decision making and borrowing activity, while others were only seeing a slow down in some parts of their portfolio, with a pickup in other parts. Now that we've had two months to digest the announcements and several more positive developments on tariff negotiations, we expect that the tone from bank management teams will be more positive. Now, we don't expect them to say growth is accelerating, but we do expect that they will say loan growth is holding up with strong pipelines. On the second topic, net interest margins, we expect to hear that there is still room for margin expansion as we go through this year. And that's coming in two places, particularly as bank term deposits continue to reprice lower. And then the back book of fixed rate loans and securities, essentially assets that were put on the books four to five years ago when rates were a lot lower, are now rolling over at today's higher rates. Betsy Graseck: So, is the long end of the curve going up a good thing?Manan Gosalia: Yes, for net interest margins. But on the flip side, the tenure going up is slightly negative for bank capital. So that brings me to my third theme. The regional banks are overall in a much better place on capital than they were two years ago. Balance sheets have improved. Capital levels remain solid across the sector. But the recent increase in the long end of the curve is marginally negative for capital, given that there will be a higher negative mark on securities that banks hold. But we believe that higher capital levels that regional banks have accumulated over the past couple of years will help cushion some of these negative marks, and we don't expect the recent shift in the tenure will have a meaningful impact on bank capital plans.Betsy Graseck: So, the increase in the 10-year pulls down capital a little bit, but not enough to trip any regulatory minimums?Manan Gosalia: Correct.Betsy Graseck: So, all in the 10-year yield going up is a good thing?Manan Gosalia: It's slightly negative, but I would expect it does not impact bank growth plans. Betsy Graseck: Okay. All in, what's the message from mid-cap banks?Manan Gosalia: All in, I would expect the tone to be a little more positive than the banks had at April earnings.Betsy Graseck: Excellent. Thanks so much, Manan. Ryan, what about you? What are you expecting mid-cap advisors will say?Ryan Kenny: So, I think we'll hear a lot about the trends in M&A. And when we last heard from investment bank management teams during April earnings, the messaging was more cautious. We heard about M&A deals being paused as companies processed the Liberation Day tariffs, and a small number of deals being pulled. Tomorrow at our conference, expect to hear a measured but slightly improved tone. Look, there's still a lot of uncertainty out there, but what's changed since April is the fact that the U.S. administration is flexing in response to markets. So that should help shore up more confidence needed to do deals, and there's tremendous pent-up demand for corporate activity. Over the last three years – so 2022 to 2024 – M&A volumes relative to nominal GDP have been running 30 to 40 percent below three-decade averages. Equity capital markets volumes 50 to 60 percent below average. There is tremendous need for private equity firms to exit their portfolio investments and deploy $4 trillion of dry powder that has accumulated and also structural themes for corporates – like the need for AI capabilities, energy and biotech consolidation and reshoring – that should fuel mergers as a cycle gets going.So, I think for this group, the message will likely be: April and May – more challenged from a deal flow perspective; but back up of the year, you should start to expect some improvement.Betsy Graseck: So slightly improved tone…Ryan Kenny: Slightly improved. And one of the other really interesting themes that the investment banks will talk about is the substantial growth of private capital advisory.So, this is advising private equity funds and owners on capital raising, liquidation, including secondary transactions and continuation funds. And what will be interesting is how the clients set here is growing. We've seen this quarter, major universities, some local governments that increasingly need liquidity and they're hiring investment banks to advise on selling private equity fund interests.It's really going to be a great discussion because private capital advisory is a major growth area for the boutique investment banks that I cover.Betsy Graseck: How big of a sleeve do you think this could become – as big as M&A outright?Ryan Kenny: Probably not as big as M&A outright, but significant. And it helps give the investment banks’ relationships with financial sponsors who are active on the M&A front. So, it can be a share gain story.So, Betsy, what about you? You cover the large cap banks. What do you expect to hear?Betsy Graseck: Well, before I answer that, I do want to just put a pin on it.So, you're saying that for your coverage Ryan, we have some green shoots coming through...Ryan Kenny: Yeah, green shoots and more positive than in April.Betsy Graseck: And Manan on your side? Same?Manan Gosalia: A little bit more of a positive than April earnings, but more of the same as we heard at the start of the year.Betsy Graseck: Okay. Going back to the future then, I suppose we could say. Excellent. Well on large cap banks, I do expect large cap banks will be reflecting some of the same themes that you both just discussed. In particular, you know, we'll talk about IPOs. IPOs are holding up. We look at IPOs where we had 26 IPOs in the past week alone.That's up from 22 on average year-to-date in 2025. And I do think that the large cap banks will highlight that capital market activity is building and can accelerate from here, as long as equity volatility remains contained. By which we mean VIX is at 20 or below. And with capital market activity should come increased lending activity. It's very exciting. What's going on here is that when you do an M&A, you have to finance it, and that financing comes from either the bond market or banks or private credit. M&A financing is a key driver of CNI loan growth. A lot of people don't know that. And CNI loan growth, we do think will be moving from current levels of about 2 percent year-on-year, as per the most recent Fed H.8 data to 5 percent as M&A comes through over the next year plus. And then the other major driver of CNI loans is loans to non-depository financial institutions, which is also known as NDFI Loans. NDFI loans have been getting a lot of press recently. We see this as much ado about reclassification. That said, investors are asking what is the risk of this book of business? Our view is that it's similar to overall CNI loan risk, and we will dig into that outlook with managements at the conference. It'll be exciting. Additionally, we will touch on regulation and how easing of regulation could change strategies for capital utilization and capital deployment. So, you want to have an ear out for that. Well, Manan, Ryan, it's been great speaking with you today.Manan Gosalia: Should be an exciting conference.Ryan Kenny: Thanks for having us on.Betsy Graseck: And thanks for listening everyone. If you enjoy Thoughts on the Market, please leave us a review wherever you listen and share the podcast with a friend or colleague today.

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